What an ESG pension fund does
ESG (environmental, social and governance) pension funds screen out or down-weight companies that conflict with sustainability and ethical criteria — such as fossil fuels, tobacco and weapons — and tilt toward firms with stronger sustainability credentials. They let you invest your pension in line with your values without giving up diversification, and many now come at near-tracker cost.
| ESG fund | Type | Ongoing charge | Approach |
|---|---|---|---|
| L&G Future World ESG Developed Index | Index ESG | ~0.30% | Tilts to better ESG scores, low cost |
| Vanguard ESG Global All Cap | Index ESG | ~0.24% | Broad global, exclusions |
| Royal London Sustainable Leaders | Active | ~0.76% | Strong active sustainable record |
| Liontrust Sustainable Future Global Growth | Active | ~0.85% | Thematic sustainable growth |
| iShares MSCI World SRI | Index (SRI) | ~0.20% | Stricter socially responsible screen |
Index ESG vs active ethical
Low-cost index ESG funds like the L&G Future World and Vanguard ESG Global All Cap apply rules-based exclusions and tilts at near-tracker prices. Active funds such as Royal London Sustainable Leaders and Liontrust Sustainable Future go further, with managers actively selecting companies on sustainability themes — at higher cost. Stricter SRI funds like the iShares MSCI World SRI exclude more sectors but become more concentrated.
Beware greenwashing
ESG labels vary widely, so check what a fund actually excludes and holds. Some "ESG" trackers still hold oil majors with improving scores, while strict SRI funds remove them entirely. Read the fund's exclusion policy and the FCA's Sustainability Disclosure Requirements labels to ensure it matches your values rather than just the marketing.
Verdict
For low-cost sustainable investing, the L&G Future World ESG Developed Index (~0.30%) and Vanguard ESG Global All Cap (~0.24%) lead; for active conviction, Royal London Sustainable Leaders has a strong record. Hold them in a SIPP — see our best SIPP providers guide, compare wider options in our best pension UK guide, and project growth with our pension calculator.